When lawyers talk about dividing property following the breakdown of a relationship, they are not just talking about bricks and mortar. A property pool consists of all assets and liabilities of the parties including superannuation. The nature of superannuation means however that the way it is dealt with is different to other assets and liabilities (subject to the age of the parties).
How is superannuation divided?
When superannuation is divided following a separation, money held in the fund of one party is paid into the fund of the other; this is called a “superannuation split”. Such a split can only occur if it is provided for in a Court Order or a Binding Financial Agreement (BFA) and approved by the superannuation fund itself.
A superannuation split will be identified in the Order or agreement as a percentage division of the fund, or a dollar amount.
Does there have to be a superannuation split?
Depending on the value and structure of the property pool, it may be the case that superannuation is not divided at all. There is no requirement that there be a superannuation split, but often such a split is necessary to achieve a just and equitable settlement.
What about self-managed funds?
The division of self-managed superannuation funds will also be dealt with in a Court Order or BFA.
Some common scenarios that we see with self-managed funds are as follows:-
- One party may retain the fund and pay out the other party – bearing in mind that any cash payment received is superannuation and must be treated as such by the receiving party. In practise this means that if the party receiving a cash payment is not at retirement age that payment must be paid into a superannuation fund in the receiving party’s name.
- The assets of the fund might be split, i.e. if the existing fund held a share portfolio and a commercial property, the husband and wife may agree to each retain one of the asset types.
- Both parties may cash out the fund and the fund itself be wound up. In practise this would mean that all assets of the fund are sold, and the net proceeds divided between the former spouses in accordance with the property settlement, but again such cash can only be dealt with as “superannuation”.
There are a number of rules that self-managed superannuation funds must follow to be deemed a compliant fund. Changes to the ownership of said funds may affect the funds compliance. It is important to obtain legal advice when considering the division of assets following the breakdown of a relationship, particularly if there is a self-managed superannuation fund.
Contact one of our Family Law Solicitors today for expert advice concerning your separation.